I have been a scientist in the field of the earth and environmental sciences for 33 years, specializing in geologic disposal of nuclear waste, energy-related research, planetary surface processes, subsurface transport and environmental clean-up of heavy metals. I am a Trustee of the Herbert M. Parker Foundation and consult on strategic planning for the DOE, EPA/State environmental agencies, and industry including companies that own nuclear, hydro, wind farms, large solar arrays, coal and gas plants. I also consult for EPA/State environmental agencies and industry on clean-up of heavy metals from soil and water. For over 20 years I have been a member of Sierra Club, Greenpeace, the NRDC, the Environmental Defense Fund and many others, as well as professional societies including the America Nuclear Society, the American Chemical Society and the American Association of Petroleum Geologists.

Actual Energy Costs Are Driving Us Towards a Natural Gas Nation

Cosumnes natural gas power plant, CA. Newer gas plants are cheaper to construct, per kWhr produced, than all other energy sources. Source: SMUD

Last post, I put out numbers for the actual costs for producing energy from the six major sources normalized over their entire life-span. The idea being that someone is going to lay down billions of dollars to build and operate energy systems to produce a trillion kWhrs of electricity, but what is the actual cost versus how much will they have to pay? The results were 4.1 ¢/kWhr for coal, 5.1 ¢/kWhr for natural gas, 3.5 ¢/kWhr for nuclear, 4.3 ¢/kWhr for wind, 7.7 ¢/kWhr for solar, and 3.3 ¢/kWhr for hydro. I want to go over each source separately to determine what they mean and how they might change over time so that society can develop a long-term sustainable energy mix able to meet future demand without going broke in the long run or destroying the environment.

Unfortunately, actual costs for any energy system are difficult to determine from information normally provided. Systems with good historic data are usually old technologies that are not going to be constructed in the future, e.g., traditional coal-fired power plants, GenII nuclear power plants, and older solar PV cells. Some of the latest technologies such as GenIII nuclear, high-purity germanium solar, and newer combined cycles have not been run long enough to obtain life-span operational and maintenance data. Also, the first few built of any new design do not reflect anticipated final costs as the first few units are always more expensive until routine construction and manufacturing is achieved. The reason for subsidies, incentives, tax breaks and loan guarantees is to overcome these initial hurdles, but such subsidies cannot be sustained indefinitely without hidden economic damage to society.

True comparisons among various energy systems requires normalization to total power produced from each system over its life using capacity factors and lifespans. Key assumptions include the following recent commodities spot prices: $70/barrel for oil; $40/ton for coal; $4/tcf for natural gas (this is fluctuating wildly and is presently about $2.60/mcf as a result of the sudden rise in fracking but supply&demand forces will bring it back to $4 or so within a few years, along with the recognition of its growing environmental impacts); $500/ton for steel; $2.50/lb for copper, $70/ton for cement, and $100/lb for yellowcake (U3O8). Changes in these assumptions are linear within each cost category and can be easily corrected as numbers evolve.

The following discussion is an amalgam of information drawn from various sources cited below in the References as well as the U.S. Department of Energy (DOE) and its many divisions (Energy Efficiency and Renewable Energy, National Renewable Energy Laboratory and the Energy Information Administration), the International Energy Agency, the Organisation for Economic Co-operation and Development, and the U.K. Parliamentary Office of Science and Technology. Capacity factors used are historic averages over the last 5 years, not theoretically high values often quoted, particularly important for the renewables and natural gas in this country.

Starting with natural gas, we can calculate the direct costs of building and operating the number of plants required to produce a trillion kWhrs over their life-span. We need to use real numbers, either builds or buys that have occurred recently, e.g., Who has recently paid to build one of these and how much did they pay? The Tennessee Valley Authority recently spent $820 million dollars for a natural gas power plant that produces 880 MW that operates at a capacity factor of 42% for the 8,766 hours each year over its 40-year life, producing 130 billion kWhrs, more or less.

That’s it. 130 billion kWhrs is what this plant will produce. To produce one trillion kWhrs over their live span will require building about 8 (7.7) of these plants at a cost of about $6.3 billion. This is pretty cheap, the cheapest of any source: half that for coal, nuclear and hydro; a fifth that for wind, and a tenth that for solar. Theoretically, gas can operate at higher capacities than 42%, and does in some countries like Dubai, but never in the Unites States. Gas can ramp up and down quicker than any other source, but its fuel costs per kWhr are higher than any other source, so gas is used to capture peak demand and to buffer intermittent sources like wind, both far more lucrative for gas than constant operation. This cycling ability together with the cheap construction costs, the new abundance of unconventional gas sources, the ease of regulatory approval, and the perceived acceptance of gas by the public relative to other baseload sources, makes gas the preferred generation source in the U.S., and is driving us to more and more gas generation for electricity.

However, once built, these plants now have to be fueled, operated and maintained. Using historic figures of fuel costs for gas of 4¢/kWhr that held until most recently, the production of one trillion kWhrs will cost about $40 billion in fuel for these 8 plants, although this will depend heavily on natural gas prices over the next 40 years. Operation and Maintenance (O&M) costs for natural gas are only about 0.5¢/kWhr, so for one trillion kWhrs, O&M costs will be about $5 billion. Decommissioning costs are a factor for most systems beyond the ordinary site operation costs and are only 0.002¢/kWhr for natural gas, or $20 million for these 8 plants, quite small. So to produce a trillion kWhrs from gas would give a life-cycle actual cost of:

These costs do not include financing, subsidies, tax credits, mandates or other non-production costs, but just the actual costs to produce electricity from cradle to grave. Since fuel costs make up the largest portion of this cost for gas, the future economics of gas-fired power plants is all about the fuel, its cost and its availability. This is why the health and environmental hazards of fracking gas shales are being down-played so vehemently by the industry. The Onion reported last month that a new labor market study found that the fracking industry hired more PR graduates than any other industry last year, even the infamous firm Hill+Knowlton, hired by the tobacco industry years ago to refute the findings that smoking caused cancer.

But don’t worry, our health care costs are so much higher than our energy costs that the 4,000 deaths each year from the trillion kWhrs generated by natural gas in the U.S., and a bit more environmental insult to the planet, is lost in the cost of doing business.

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Deepwater wind has a contract with National Grid to sell at somewhere in the 24 cents/kwh range with a 3.5% yearly increase. That doesn’t include the $50 to $100 million for undersea power cables to the mainland.

Yes, but 4.3 cents is life-cycle, the longer you run wind, solar and nuclear, the cheaper they are. But I am being very generous and not including non-direct costs. The 24 cents you quoted is a price with all the other financing, distribution and other costs above and beyond the actual cost, and that little to do with the actual costs.

Sorry, but none of the equipment used for wind, solar and nuclear will have an infinite lifetime. Not to pick on wind, but I too often see evidence of unanticipated O&M. Gearboxes for some wind power models have failed in less than a decade. When those fail, the high cost of mobile crane service to the (often) remote location of the tower must be factored in.

Yes, with all the losses prior to burning in the plant, the CO2 emissions are not much lower than coal. Also, if coupled with wind as the cycling buffer, then emissions actually go up. That’s what worries me, that the initial costs for gas are so low that gas generation will expand rapidly despite the hidden costs and before we start capturing the externalities, if we ever do.

Anyone else notice the massive and pervasive advertising campaign being mounted by the natural gas industry since Fukushima?

I wonder how the acceptance of nuclear might be different today, and how they would be treated by the advertiser-supported mass media, if they had dedicated an equal amount to PR over the last few decades?

And if anyone thinks methane is going to reduce GHG emissions, they need to look at this recent Cornell study: http://thehill.com/images/stories/blogs/energy/howarth.pdf

Yes, emissions actually go up with wind because it is generally hooked into the grid and buffered by gas (and even coal!) through rapid cycling which decreases efficiency, increases wear and increases CO2 emissions. I need to do a post on this but it’s hard to get detailed emissions data from cycling – it’s always given for constant running.

I hope you do realize that “The Onion” is fake satirical news? I’m not sure if you were just trying to inject some humor into your essay, but an otherwise serious, factual essay that cites “The Onion” will make a lot of people scratch their heads. . . or worse – those who don’t realize The Onion is satire might actually think it’s real.

Yes, I know the Onion, but their description of the PR hiring of the fracking industry is real. I do try to reference as large a spectrum of sources as possible, and I do try for some humor although I may fail. I try to think of how Jon Stewart would put it, but scientists aren’t generally funny!

Mr. Conca, While The Onion is “America’s Finest News Source” and often exposes truths deeper — and more hilarious — than reality, it a parody newspaper and entirely fiction. That you cite it in earnest in your penultimate paragraph reduces the credibility of any points you might be making. Please clarify. Best, Ben

Yes, the Onion is completely fictitious. It just fit what I have been hearing from colleagues in the industry, that they are doing a big PR push, and I have seen some big ad campaigns. But there are no numbers like that. i will not do that again!

I don’t see how combined cycle gas, which I assume you are using for comparison, could surpass hydro’s open-a-valve-one-minute spin up times. NG for peak demand, as I recall, requires the plant to run at idle burning fuel without making electricity. Also, politics aside, Carbon costs are likely and should be factored.

Finally: $4 for NG sounds high now, but ask Calpine about counting on cheap NG;) $2.5 is a perfect storm of supply and transportation issues soon to be corrected.

I agree, we need to factor in carbon constraints. Yes, gas will exceed $4 soon and most likely will never go below it again. yes, hydro can ramp up fast if water supply is sufficient. yes, combined cycle gas is not as good at ramping as older units, but is being used almost exclusively. Even coal is being used for load-following in Texas

I discuss them in other posts like http://www.forbes.com/sites/jamesconca/2012/07/08/the-direct-costs-of-energy-hydronuclear-best-solar-still-lagging/ http://www.forbes.com/sites/jamesconca/2012/06/15/the-naked-cost-of-energy-stripping-away-financing-and-subsidies/